Understanding the Different Rating Methodologies Used for AARP Supplemental Insurance Plans

What rating methodologies are used for AARP supplemental insurance plans?

Final answer: AARP supplemental insurance plans use two main rating methodologies: Community-rated, where premiums are the same for everyone and do not increase with age; and Age-rated, where premiums are based on the age at purchase and do not increase with age after purchase.

Community-rated Methodology

When evaluating AARP supplemental insurance plans, commonly referred to as Medigap plans, there are primarily two rating methodologies used by insurance companies. These methodologies determine how the premiums are set or rated over time.

Community-rated (No-Age-Rated): Here, the same premium is charged to everyone who has the Medigap policy, regardless of age. This means that your premium is not based on your age when you purchase the policy and will not increase as you age (although it might go up because of inflation or other factors).

Age-rated Methodology

Age-rated (Issue-Age-Rated): This method sets the premium based on your age when you first buy the policy. While the premium does not increase because of your age after you first buy it, it can still go up due to inflation and other factors.

It is essential for individuals, especially students, to understand the difference between these rating methods, as they can significantly impact the long-term costs of their healthcare coverage.